Ecology

In its business, LUKOIL is guided by the highest environmental standards.

Taking social responsibility for the efficient use of natural resources in all its earnestness and maintaining favorable environmental conditions is regarded as one of the Company's priorities over the course of project implementation.

ENVIRONMENTAL LIABILITY INSURANCE

Since 2003, a system of insurance against irretrievable risks and risks that pose a threat to the business of the Group entities is in place in the LUKOIL Group (the Group). The Group’s basic local regulation in the field of insurance is represented by the Basic Provisions on the Strategy and Policy for Insurance Coverage for LUKOIL and its Subsidiaries enacted by LUKOIL’s order No. 110 of May 30, 2003. As part of the above system an all-round approach was adopted to voluntary insurance of the Group organizations’ third party and environmental liability.

Third party liability insurance agreements provide coverage for the costs associated with the containment and elimination of environmental pollution. Such insurance policies are obtained by producing, oil refining, petrochemical, marketing and midstream LUOIL Group organizations.

An insured event occurs when the Insured Person becomes subject to civil liability for causing harm to life, health, or property of third parties or to the environment which is evidenced by a written claim filed by the affected person or entity (Victim, Beneficiary) or by a court judgment that came into force, provided that such event occurred during the insurance period as a result of a sudden, unintended accident at a highly dangerous facility operated by the Insured Person and specified in the Insurance Contract, including accidents that resulted in the emergency declaration according to the applicable Russian law.

The Contract defines the Accident as an occurrence involving damage to or destruction of structures, engineering devices, explosion, emission of hazardous substances, discharge of water from the storage pond, or liquid industrial agricultural waste that occurred during the operation of a highly hazardous facility and caused harm to the affected persons.

The Contract defines an emergency as a situation in a given area that occurred as a result of an accident, dangerous natural phenomenon, catastrophe, Act of God or other disaster that may result or resulted in human casualties, damage to human health or environment, significant financial losses or worsening of people’s living conditions.

Environment damage — within the amount of costs associated with decontamination of the polluted area and/or rehabilitation of agricultural land, as well as within the amount of monetary damages due to the non-recoverable consequences of an administrative offense in the amount calculated according to the rates and techniques for assessing the environmental damage approved by the executive authorities that deal with governmental management of environmental conservation activities.